Good morning, everybody. First, I'd like to start with our Safe Harbor statement. I think everybody's familiar with this, just on any forward-looking statements that Matt or I may make during our presentation. I'm really excited to be here today to talk about Strattec . Strattec became a public company in 1995. I joined as President and CEO last July. It's been a super exciting year. I was explaining to someone, it doesn't seem like it's been a whole year. What I want to talk about is some of the progress that we've made and an overall update on the business.
What you can see here is we have a very diverse product portfolio, all the way from the front of the vehicle to the rear of the vehicle, with our power access products like power liftgates, tailgates, power sliding doors, as well as locksets, keys, and digital key fobs. Our products really are powertrain agnostic. What that means is we don't have specific product lines for electric vehicles or internal combustion engines, which helps us keep a good balanced product as our industry is transforming quite a bit. From a customer standpoint, we primarily traditionally have served Ford, General Motors, and Stellantis. We have a well-balanced product portfolio, and we've got manufacturing locations both in the United States and in Mexico. Our headquarters is in Milwaukee, Wisconsin. We have an engineering and sales center in Auburn Hills, Michigan, that helps keep us close to our customers.
Our manufacturing capabilities are around die cast, stamping, printed circuit board, injection molding, and assembly capabilities. This talks a little bit about the transformation progress that we've been under over the last year. We really had four priorities. First has been about the team, making sure we had the right team to unlock the opportunities in the business. I'm a hockey fan, not a baseball fan, but I've been told that to explain this in the innings, we still are in the early innings of our transformation. We've made a ton of progress, but we really still have a lot to go. From a team perspective, we've got a refreshed executive team. We're continuing to focus on capability for operations and supply chain. As we think about our operational excellence, we've continued to focus on making sure we have the right cost structure for our business.
From a revenue standpoint, we've unlocked $8 million in annual pricing already in fiscal year 2025. We have continued to focus on making sure we have the right products for our customers in the right space. There has been a lot of modernization of the business. Processes, systems, and tools are extremely outdated. To make sure that we've got a sustainable business moving forward, not only have we looked at the opportunities, but we've looked to make sure that we've got modernized business to be able to continue to drive the progress that we've seen in fiscal year 2025. Getting into the value creation a little bit more, what we've been able to unlock in the business is, again, from an operational excellence standpoint, we've been able to reduce our headcount by 15% in the fiscal year.
We haven't had any impact to our customers through the cost initiatives that we've put into the business. We have looked at, as I talked about, implementing best-in-class systems and driving an operating cadence for the business. That is so important for us because there is a lot of opportunity here. Making sure we've got the team aligned around the right priorities so that we're making good progress is a critical part as we think through this transformation. As I said, we've invested in talent. I'm joined here with Matt Pauli, who is a great CFO partner. I'm lucky that he joined the business in November. We also added a Chief Commercial Officer in November of last year, a Chief People Officer, which this business, for over 3,000 employees, never had historically.
We have recently added talent from a Vice President of Operations and Vice President of Supply Chain that's really going to be critical as we continue to unlock the opportunities in the business. As we look at our product portfolio, we've looked at making sure that, again, under the prioritization theme, we're focused on growing the business where we think we have the most opportunity from a profitability standpoint and a differentiation standpoint for our customers. What I'm really proud of as I talk about making sure we've got the team prioritized, and the accountability of the team, is we've been able to unlock tremendous cash generation in fiscal year 2025. That really was a cleanup of our working capital, but also taking the margin improvements and from driving cash performance on our margin improvement of the business. We think about our products in three segments.
The first is security and authorization. This is where we have our traditional lock and key business. We're focused on growing our digital key fob. The digital key fob really works seamlessly with consumers' phone to give an experience. As you think about going to valet or giving your car to a family member, the key fob still is a critical part of your accessibility into your vehicle. From a vehicle access standpoint, this is where our power liftgates and power sliding doors are where we think we have continued opportunity across our customers. Prior to me joining, the team took their outstanding engineering capability and actually demonstrated a new product segment, user interface that's around steering wheel switches and electronic shifter modules.
What that demonstrated was our ability to take our software, our mechanical, our electrical expertise, and create a new product segment for a new customer set, which really is hard in this industry and demonstrates the capability of the team. As we've looked at that market, as there's less and less switches going into vehicles, and it's already a crowded space, we want to continue to serve our customers in that segment. We're really going to focus our priorities around the growth areas of opportunity in our power access business and our digital key business. Before I hand it over to Matt, again, to highlight some of the great progress that our employees at Strattec delivered in fiscal year 2025, we generated, as I talked about, a tremendous amount of cash, so $71 million of cash flow from operations. Our revenue growth, we delivered 5% revenue growth.
That was both from pricing and some new customer launches that we experienced in fiscal year 2025. Our profitability increased by 280 basis points, and that's from the work that we've done on the underlying cost structure of the business. Our adjusted EBITDA margin of 7.7% expanded 220 basis points. I'm really proud of the work that the team has done. As I said, we're in early innings, so there's more work to do here. I'm going to hand it over to Matt to go through some of the financials.
Thanks, Jen. I'll walk everyone kind of through our financial results. As a reminder, we are at June 30th fiscal year end. We just recently completed our Fourth Quarter and our fiscal 2025. Starting off with sales, on the left-hand side, you can see our sales for the fourth quarter. We delivered $152 million of sales. It was up about a little over 6% on a year-over-year basis. 60% of the increase in sales was driven by volume, both on existing platforms and new program launches, and the other 40% related to margin accretive pricing. We implemented new pricing in January that we saw being realized here in our fourth quarter. On the right-hand side, you can see our sales over the last five years. On average, it's a 4% annual growth rate.
Since 2022, which had the industry-wide kind of electronic shortage, you see a steady improvement in our sales, both from pricing as we recovered some of the inflation, albeit on a delayed basis, plus program launches in 2024 and in 2025. Those additional sales, plus some of the actions that we've taken to address our cost structure and the pricing, have helped us from a gross profit perspective. We finished our Fourth Quarter at 16.7% from a gross profit margin, and our full year was 15%. We do have, as Jen mentioned, we do have manufacturing operations in both Milwaukee and in Mexico. With the Mexico, the peso does impact our results. It was a benefit in our results, both in the fiscal year and on a quarterly basis.
If I exclude the benefit of currency in the current year and some prior year one-time pricing, we still improved our margins by over 180 basis points. How did we do that? Part of that is the pricing that I mentioned earlier, but we also did some restructuring to eliminate roles, which we saw the savings in the fourth quarter. Longer term, our margins are 15%. Longer term, we'd expect our gross profit to be in the 18%- 20% zip code. We have demonstrated the ability to be at that level in the past, and we have line of sight to that. Next, if we look at our selling admin and engineering costs, the comparison is a little bit challenging on a year-over-year basis, both in the Fourth Quarter and from a full-year basis.
Part of that is because last year we received a one-time recovery of about $4.7 million of an engineering reimbursement. In the current year, we have higher bonus expense. Our bonus program, which covers about a third of our employees, is focused on two financial metrics, that being EBITDA and cash flow from operations. Given the financial performance of the company, we had higher incremental bonus expense in the current year. I think the key takeaway, though, from an SAE perspective, it's 11% of our sales. On a longer-term basis, I'd expect it to be in the 11% to 12% range as we continue to make investments in the business. From a total net income perspective and EBITDA perspective, the top half of the slide here shows our results for the fourth quarter, and at the bottom is the full year.
For fiscal 2025, we generated $21 million of adjusted net income, or $5.38 a share. Our EBITDA was $43.7 million, up about 220 basis points on a year-over-year basis. If we look at our liquidity, balance sheet, and cash flow, at the end of the year, we had $84 million of cash on the balance sheet and only $8 million outstanding of debt. The $8 million relates to our 51% owned joint venture, where we have a separate revolving credit facility. During the year, we generated $71 million of cash from operations, and we invested a little over $7 million in CapEx. The cash flow from operations was really driven by our cash earnings, as well as a significant reduction in our working capital and our pre-production balances.
From a CapEx perspective, I would think about our CapEx on an ongoing basis of 2%- 2.5% of our sales, so closer to $12 million- $13 million. From a capital priorities perspective, as Jen mentioned, our capital priorities in the short term are really focused internally on how do we transform the business. We're cognizant that we're a cyclical business. There's a lot of uncertainty around tariffs and demand. We're comfortable operating with the cash we have on the balance sheet. Longer term, we'll look at other shareholder value creation opportunities, including M&A, but we've got to work on the transformation internally first. That kind of wraps up 2025 for us. If we think about 2026 and going forward, for 2026, we expect revenues to be modestly down to flat.
If you look at S&P Global data for North American Automotive, which is the industry projections for production volumes, it would suggest that we'd be down 6%. We don't necessarily see that here in the short term based on our EDI from our customers, but we kind of have a lull in new program launches in fiscal 2026. Despite the top line headwinds in 2026, our focus is really around two areas. One is continuing to improve our margins. We did take some actions this past year, but we've added additional resources around manufacturing and supply chain to help us accelerate some of the operational improvements that we know exist in the business. The other piece is around cash generation. As I mentioned earlier, we generated $71 million of cash this past year. That's not kind of the normal. I would expect it to be kind of half of that.
Half of it was kind of cleanup of historical working capital balances, and the other half was kind of the normal cash flow that you should expect on a go-forward basis. Lastly, just to summarize the points that Jen and I discussed today, the Strattec investment rationale, the Strattec story is a transformational story. We're in the early innings of the transformation of the business. We do have a new commercial team that's kind of relooking at our product portfolio. How do we expand within our core market of North American Automotive? How do we expand geographies, or how do we think about our products as it relates to the broader transportation market? We definitely have an opportunity in front of us around operational efficiencies and how do we improve our gross profit and our profitability.
We have a brand new leadership team and talent within the organization to help facilitate that. Lastly, we've got a strong balance sheet to support those transformational efforts. We're excited about the opportunity at Strattec, and we appreciate your interest today. Are there any questions?
Yeah.
On the back of your, when you look down into your business land, it's kind of mainly been free auto. How has that kind of shifted, one, over time? Two, it sounds like a lot of your production is going into U.S.-based vehicles. Have you looked at opportunities to sell abroad, or how much is the exposure there in terms of being able to sell into other global auto?
Yeah.
Go ahead.
The question was, traditionally, we've really primarily served the traditional Ford, GM , Stellantis, the big three. How are we thinking about our customers, both from outside of the U.S. standpoint, North America, and outside of that customer base? I would say that's where we really see a big opportunity. We've demonstrated our product capability with those customers, and there's a certain level of capability you have to have to serve the transportation market. We've demonstrated that. We haven't necessarily engaged with that broader customer set. Our focus right now is, one, with a lot of things going on in the tariff environment, how do we serve the customers that are in North America, where we have our footprint today outside of our traditional customers? We can look at expanding our geographic reach.
There are other transportation providers where we think our product has relevance in, you know, heavy vehicle off-road customers. We can also look at expanding our customer set. I talked about we've added talent in our commercial organization. While their near term in 2025 was, okay, what are the pricing opportunities that we were able to capture early in the year to help our profitability, they're also now laying that foundation for where do we have growth. The work that we're doing today, because it's a long-cycle business, really, we won't see that revenue generation until 2028 and beyond from a fiscal year standpoint.
That's all.
Yeah. Thanks for the question. Yeah.
Are you guys employing any sort of ways to hedge against any volatility to do with the peso versus the dollar?
Yeah, the question is, are we employing any hedge activity to hedge against the peso exposure? We are entering into hedges today. Roughly about $60 million of our spend is in peso, and we are entering into hedges to offset the impact. To think about it, you know, a 5% strengthening of the dollar is roughly $4 million- $5 million on an annualized basis.
Yeah.
I'm assuming you're going full out in one year.
Thanks for noticing.
Your gross margin, you want to get it to where? $18 million? $16 million, something like that?
Yeah, the question is kind of what's the target from a gross margin perspective. We wrapped up the year at 15%. If you look at our Fourth Quarter, it was 16%, which had the benefit of some of the pricing and some of the cost takeout actions. Longer term, we'd like to get closer to the 18%- 20% from a gross margin perspective.
Longer term, five years?
I would say nearer end than five years. In the next three years, we think we can get there. It'll take some automation. We can look at some of our operational improvements, and I think we have a big opportunity on the supply chain side as well.
I would say that a lot of that was low-hanging fruit for us to capture in year one. We're really excited that there continues to be opportunity. Some of that will require investment to understand some of that opportunity.
I have a question on the direct, and that to some of the investment side, because it seems like you've got your processes and some of your manufacturing capabilities that may be a little bit behind.
Yeah.
Based on the legacy of the company, what's it going to take to modernize the production facilities and get some more of that automation?
Yeah.
To be able to unlock the gross margin. From a longer-term perspective, you mentioned 18%- 20%, you said we're comfortable with on the free year. There are other auto parts manufacturers that have more free margins than that. Could you go higher over time if you invested in these types of automated facilities?
I'm going to repeat the question. I'm going to do my best. I think your question really was, how are we approaching modernizing our manufacturing facilities? What are our expectations longer term from a margin perspective if we did that? When we talk about modernization, modernization really is twofold. One, it's kind of the business processes that drive the business. For example, we've installed a robust operating cadence that helps us look at the opportunities for the business. That's one area of modernization. The second area, what you talked about, is kind of what levels of automation can we put in and how long does that take? What I would say is the hardest part of this challenge or this transformation over the past year has been about prioritization. There is so much opportunity.
Making sure we're keeping the team focused on those opportunities has been a big part of how we've been able to accomplish what we've accomplished in year one. I would translate that to, as I think about modernization, a lot of our focus has to be where do we get the biggest opportunity? For products that are in production today, there may be areas of opportunity that we can continue to invest in automation to become more efficient. Longer term, it may be a completely different type of automation that allows us to have more flexibility. We're kind of staging our modernization thinking as far as how do we capture some of the quick wins to keep the team excited and engaged about the opportunity in the business, and then how do we lay that foundation for unlocking some of that longer-term automation?
Your other question was, where do we think the opportunity longer term of the business is? Matt and I are still learning every day. I think we're comfortable in saying where we think the opportunity is because that's what the business demonstrated before, and that's what we have line of sight to. We'll continue to understand what the longer-term opportunity is. I don't know if you want to add.
No, I think you hit it. I think you know we've got the footprint that we need. We've got excess capacity as well, so there's not an investment needed there. Is there an opportunity to go north of 20%? Yes, but I think that's a little bit longer term. There's obviously investments that are required and potentially looking at kind of our footprint as well.
Yeah.
How important is M&A?
Yeah, the question is, how important is M&A? In my experience, if you try to bolt on something when the foundation is still unstable, neither one of those things are successful. Our focus really is about stabilizing our business while we start thinking about what are our core competence, what would be complementary. I think from a longer-term growth standpoint, it will be an important part of our story. It's not anything that we would be able to manage through while we're continuing kind of fixing the underlying business. Any other questions? Perfect. Thank you very much.